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Wednesday, December 6, 2023

Rumors Spur Run On Research In Motion Weeklies

     Today’s tickers: RIMM, POT, AXP & HSC

RIMM – Research in Motion Ltd. – Speculation that activist investor Carl Icahn may have approached and taken a stake in beleaguered BlackBerry maker, Research in Motion Ltd., sent shares in the Canadian company up as much as 7.4% to an earlier high of $23.29. The hum of the rumor mill spurred a pile-up in weekly call options on the stock, as traders scrambled to get long the short-dated contracts in the event that the rumors have legs. Speculative plays are heaviest in the Sept. $23 strike call, where more than 14,100 contracts changed hands against previously existing open interest of 2,610 positions. Most of the calls were purchased for an average premium of $0.42 a-pop, thus preparing longs to profit should RIMM’s shares exceed the average breakeven price of $23.42 at expiration this week. Investors exchanged more than 7,100 calls at the higher Sept. $24 strike today, and appear to have purchased a little more than half of the contracts at an average premium of $0.30 a-pop. Traders long the calls may benefit from continued gains in implied volatility and the price of the underlying shares. Clarity on the rumors from Icahn himself may see the stock continue to climb, or could burst call buyers’ bubble and send shares back down. Lack of clarity could potentially work in favor of long options positions should speculation continue to lift volatility.

POT – Potash Corp. of Saskatchewan, Inc. – Bullish positioning in options that expire at the end of the trading week popped on Potash Corp. this morning, as shares in the producer of fertilizer and feed products rallied 5.75% to $50.05 by 11:05 am EDT. Shares in the Canadian potash producer joined in on today’s relief rally in global equities, and were raised to ‘Overweight’ from ‘Neutral’ with a 12-month target share price of $60.00 at Atlantic Equities today. Short-term bets on continued strength in Potash Corp.’s shares through the end of the month pushed volume in Sept. ’30 $50 and $52.5 strike calls up sharply in the first half of the session. It looks like investors snapped up more than 2,900 calls at the Sept. $50 strike for an average premium of $0.94 each. Buyers of the calls profit if shares in POT exceed the average breakeven price of $50.94 by week’s end. Bullish trading spread to the Sept. $52.5 strike, where more than 3,300 calls changed hands against previously existing open interest of 359 contracts. Most of the $52.5 strike calls appear to have been purchased for an average premium of $0.23 each. Investors long the calls profit in the event that POT’s shares rally another 5.35% over the current price of $50.05 to surpass the average breakeven point on the upside at $52.73 at expiration. Options implied volatility on the stock slumped 10.1% to 46.04% by 11:30 am in New York.

AXP – American Express Co. – Weekly options on American Express saw a burst of activity within minutes of the opening bell this morning. It looks like much of the trading in Sept. ’30 calls and puts was initiated by one trader placing near-term bullish bets on the stock. Shares in American Express Co. earlier rallied as much as 2.3% to $48.66, but pared gains in the past couple of hours to trade flat on the day at $47.56 by 11:45 am EDT. Trading patterns in AXP weeklies suggest call buying and put selling were the two most popular strategies engaged in the first five minutes of the day. The trader or traders responsible for the bulk of the near-term action purchased around 1,000 calls at the Sept. $48 strike for an average premium of $1.08 each. Premium on these contracts are well off their highs of the session, and currently tout an asking price of $0.61 apiece. Investors getting long the calls at an average of $1.08 per contract profit at expiration this week if shares in AXP exceed the average breakeven price of $49.08. Weekly puts in play were nearly all sold at exactly the same time this morning. It looks like the put seller responsible for the prints is harvesting available premium in exchange for bearing the risk that the stock drops before the week is out. The trader sold some 756 in-the-money puts at the Sept. $49 strike to pocket an average premium of $1.13 each. The action spread to the Sept. $48 and $47 strikes where some 850 and 687 puts sold at premiums of $0.65 and $0.36 apiece, respectively. The investor keeps the full amount of premium received on the transaction if shares in AXP exceed $49.00 at expiration. Put selling dragged prevailing levels of implied volatility at the strikes described lower this morning, while the overall reading of implied volatility on the stock stands 8.5% lower at 41.70% just before 12:00 pm on the East Coast. American Express Co. is scheduled to report third-quarter earnings after the final bell on October 19.

HSC – Harsco Corp. – The provider of industrial services and engineered products appeared on our ‘hot by options volume’ market scanner today after sizable prints in Jan. 2012 calls and puts lifted volume in Harsco Corp. options to nearly twice that of overall open interest on the stock. The investor responsible for the transaction appears to be selling puts to buy calls in a transaction that may yield substantial profits if the price of the underlying extends gains through next year. Shares in Harsco Corp. are up 4.5% in early afternoon trade to stand at $20.99 just before 12:30 pm. It looks like the investor sold 2,000 puts at the Jan. 2012 $20 strike at an average premium of $1.955 each, in order to finance the purchase of 2,000 calls at the Jan. 2012 $22.5 strike for a premium of $1.90 apiece. The trader pockets a net credit of $0.055 per contract, which he keeps as long as shares in Harsco exceed $20.00 at expiration. Additional profits are available to the investor should shares in HSC rally another 7.2% to exceed $22.50 by expiration day in January. The Camp Hill, Pennsylvania-based company reports third-quarter earnings ahead of the open on October 27.

Caitlin Duffy

Equity Options Analyst


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